Gaining Capital Project Control with Cost Management Software
November 02, 2021
How confident are you in your ability to deliver your capital project within its target dates and costs? If the answer is “not as much as I’d like,” consider the technology being used to manage your project costs, especially if it’s computer spreadsheets or siloed point solutions. Why? As capital projects have become more complex, there’s also been a corresponding need for greater efficiency in delivering those projects on time and on budget.
Fortunately, as with other construction-specific technologies, advances in cost management software have greatly improved the way contractors and owners are able to monitor the financial health of those projects — and confidently manage costs throughout their life cycles. These software advances are likely fueling their increased interest in project cost management being key to their business success.
What could your capital projects stand to gain with a comprehensive cost management software solution? Let’s take a look.
Data reliability through a single source of truth with cost management software
Outrunning a project’s established budget is easy to do. Aside from fluctuations in the rates for labor and materials, there’s the uncertainty of the financial impact of weather or economic events. Added to that the various technologies construction companies use to track all the costs associated with a build, such as estimating, bidding, scheduling and forecasting.
As project complexity continues to grow, so too does the need for solutions to manage data-rich functions. Over time, each one becomes its own siloed source of truth. This begs several questions: Who’s responsible for ensuring everything is accurate and current? Is all modified data being uploaded into the other solutions? Which of them has the latest information that is the “real” truth? At this rate, cost overruns can seem all but inevitable.
That’s why the larger and more complex projects become, the more imperative it is to unify all the data they’re generating — including all critical cost information — into a single source of truth within cost management software. This is the one place where everyone can access the most current data needed to collaborate and keep progress moving. Adopting software where everything is centralized eliminates wasted time bouncing between programs, improves trust in the integrity of all project information, and empowers decisions and other data-dependent actions.
Timely insights that cost management software provides via cost tracking and analysis
Staying on top of cost performance and the factors that impact it is a huge undertaking given the sheer size, sophistication and budgets that define today’s capital projects. Earned value management (EVM) metrics is the most efficient way to achieve this, delivering the right data at the right time.
This is where cost management software has the advantage. Recall the single source of truth for a moment. Having reliable data aggregated in that one repository is what feeds into these performance metrics that construction companies and project owners track and put trust into. Cost performance index (CPI) and cost variance (CV) — along with their schedule performance index (SPI) and schedule variance (SV) companions — provide a much more precise, realistic understanding of how a project is doing than individual solutions can deliver.
Starting with source data from the estimate as the baseline, and then factoring in real-time data supplied from the field throughout the build, these metrics indicate where current costs stand with respect to the original budget, whether at a given moment or over time. CPI and CV, represented as simple numeric values, answer the questions every contractor and owner wants to know: How efficient is our budget (in relation to the work performed thus far), and how far over or under budget are we (compared to what we should have spent to this point)? Analyzing these KPIs helps identify trends in performance, which in turn supports real-time, data-driven decisions and course corrections that could impact project costs.
Cost certainty and risk mitigation through historical data and live forecasts
Cost certainty, typically hard to pin down, might seem like a lofty goal given the change-prone nature of most capital projects. But cost management software can increase the odds.
One way is by leveraging those earned value metrics. Think of a properly executed project plan — it will have an established budget as well as forecasts that account for anticipated potential risks. What about the unexpected? Those CPI and CV metrics come in handy here. Because they offer current insight into how a project’s performance is evolving, it’s possible to risk-adjust plans with live forecasting when they show a strong indication that something is trending or spiking enough to require a deeper dive into the “why”. Forecasting on the go, which may seem reactive to what is already occurring, is actually a proactive technique designed to support timely, data-driven decisions on how to address developing problems before they worsen — and adjust spending accordingly.
Another way cost management software can help attain cost certainty is by learning from past projects that share similar variables with current and future projects. Because the software isn’t just about working with real-time data, it’s about incorporating real-life data, too. Applying details from similar past projects — including actual risk factors they endured — helps set a baseline or benchmark against which to create more accurate estimates and budgets (and more firmly roots those CPI and CV earned value metrics in the real world). That helps shed light on how to manage and mitigate similar potential risks (both internal and external) and evaluate their potential cost impact on the project budget.
When there’s more control over costs — and cost-impacting risk factors — throughout the build, you stand to gain more confidence that the project can be built within the initial budget. With a feature-rich cost management software solution like InEight Control, you know where your project stands financially at any given moment with its budgeting, forecasting and metrics capabilities. See how it can help you better control your capital projects by scheduling a demo.